MORNING WATCH, Aug. 27

Early indications point to market weakness Monday morning, as investors await a report on existing home sales. Thirty minutes before the opening bell on Wall Street, stock index futures indicated that both the Dow Jones Industrial Average () and the NASDAQ () would open the trading session with modest losses.    

A report on existing home sales will come into focus a bit later this morning. The report, which is due out at 10:00 a.m. Eastern time, is expected to show sales falling to an annual rate of 5.7 million homes in July, down from 5.75 million the month before.  

Outside of that, there is not a lot of news to guide the market early Monday. Some mergers were announced. Gateway () is set to move higher after Taiwan’s Acer agreed to acquire the computer maker for $1.90 a share. The deal values Gateway at $710 million and a 57% premium to Friday’s closing price.

US Steel () is acquiring Canada’s Stelco for $1.04 billion. Wal-mart () might see action early in the day after the Financial Times reported that the world’s largest retailer is looking to make acquisitions in the US for the first time in a quarter of a century. Altria () is meeting on Wednesday to discuss the possibility of spinning off its overseas cigarette division in order to lift its share price, according to the New York Times.

Trading is quiet in other markets. Bonds are little changed. The benchmark ten-year Treasury bond (September) is up 1/32^nd and its yield is now 4.62 percent. Crude oil is down 12 cents to $70.97 a barrel. Gold is off $1.40 to $676.00 an ounce.  

For stocks, the outlook is for a slow start ahead of existing home sales data. Concerns about tightening credit might also be weighing on sentiment after Home Depot () said it is selling its wholesale supply unit for $8.5 billion, which is 18% less than it has previously hoped. Lenders were reluctant to fund the deal on the original terms and that, in turn, reflects how the recent credit squeeze can impact valuations in the stock market.

Frederic Ruffy
Senior Writer & Index Strategist
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